Analysis and criticism of America's most prominent public intellectual and champion of Keynesian economics. I am part of the Austrian School of Economics, and I critique Krugman's writings from that perspective.

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Monday, April 11, 2011

Sanity is Missing in Action, not the President

In his excoriation of President Obama in his recent column, Paul Krugman claims that if Obama would have stood up against the "radicalism" of the house, perhaps we might be on our way to economic nirvana:

...let’s give the president the benefit of the doubt, and suppose that $38 billion in spending cuts — and a much larger cut relative to his own budget proposals — was the best deal available. Even so, did Mr. Obama have to celebrate his defeat? Did he have to praise Congress for enacting “the largest annual spending cut in our history,” as if shortsighted budget cuts in the face of high unemployment — cuts that will slow growth and increase unemployment — are actually a good idea?

This falls into the "don't make me laugh" category. As Lew Rockwell recently wrote, there are no "cuts" in spending at all, despite the rhetoric:

In the first place, no one is talking about actual cuts, not even the supposedly radical Republicans. These are cuts in projected spending, meaning that everyone is dealing with symbolic changes in a future that is just as symbolic. Even on paper, the only way to consider these cuts is to compare them with the GDP and the national debt -- both of which are slated to rise. Forgetting those two metrics, and looking at the actual numbers, there are no cuts at all and only increases.

Even the dating of the Republican’s balanced budget is ridiculous. So the budget will be fully balanced in 2040? That’s three decades from now. Few of the people in office will still be in office, and many will be dead. To see how viable this is, consider how many political plans of the year 1982 still survive today.

I will go even further. Despite Krugman's constant claims that prosperity will return if the government throws enough new money around and if the highest marginal tax rates are raised from 35 percent to 39.6 percent, he is absolutely wrong.

The problem is not with "idle" resources; the problem lies in the fact that the Obama administration, along with the other Usual Suspects in Congress, academe, and the media, cannot recognize that there are huge swaths of malinvested resources still dragging down the economy. It does not matter how many dollars the government throws at housing; the government encouraged the wasting of billions of dollars for something that cannot be sustained in any normal market, and no one in authority still is willing to admit any mistakes.

To make matters worse, the Obama administration continues to insist that granting huge subsidies to corn-based ethanol and electric "wind farms" ("subsidy farms" is the more appropriate term) will help lead us out of the recession. Earth to Obama (and Krugman and the others): it is impossible to subsidize oneself into prosperity. Any benefits accrued to one party MUST be confiscated from another when subsidies are involved. An economy built upon subsidies is an economy that will continue to shrink.

Krugman still is of the belief that if the political classes pretend we are prosperous and throw enough money into the economy, then suddenly everything magically will rise and the prosperity train will be on the tracks. This is utterly delusional, but delusion seems to be the watchword at the NY Times and in Washington.

69 comments:

You are subsidized by the government. You are part of the malinvestment in this economy, and nothing more than a hyporcrit with posts like this.

Earth to Prof. Anderson.

Balanced budgets cause depressions. There have been 7 balanced budgets in US history followed by 7 depressions. Learn your history.

Sorry for the harsh comments, but I generally treat people with the same respect they treat others. And Prof. Anderson and this blog have taken a right turn to the land of disrespect, and ignorance. I pity the students at Frostburg if this is how he speaks to this students.

Yea yea, only if public deficits = private savings. But those 7 depressions must have happened under a gold standard, where MMT is irrelevant. The current depression certainly wasn't caused by a balanced budget.

APL: As to your insults (is Prof. Anderson paid a fair price for his work, or "subsidized"?) It is a matter of personal opnion, but I would say, given that he understands economics and so many others in the field, especially Krugman and you, don't, that Anderson is underpaid for the knowledge he is imparting, not subsidized.

More important, your claim that balanced budgets "cause" depressions. Nonsense. We live in a world of business cycles, mostly exacerbated by bad government economic and tax policies, as well as fractional reserve lending. At the top of a cycle, business is strong and tax revenues to the government come in very high. Hence the budget is balanced. Then the cycle turns, and sometimes the economy goes way down into a depression. The balanced budget prior to the depression was just a symptom, a characteristic if you will, of the fact that there was a cycle. Big parties and lots of people at fancy nightclubs also occur at the top of business cycles. Do fancy parties cause a depression?

@Krugman...just how much more money do you think we need to spend to end this unemployment problem...seriously. I can't believe he even mentions it. The biggest problem we have right now is the government, the banks and the relationships they share.

@AP No one has said that free markets (which we do not have) are perfect and any Austrian can tell you (and has told you) that people and therefore economies are not predictable. What is predictable however is that more of the same pretty much ends up with more of the same.

Clinton surpluses, not Bush's. Did it ever occur to why the savings rate dropped to zero under Clinton, forcing consumers to lever up just to maintain some resemblance of middle class living. Think. Think real hard what happens to your checking account when taxes are cut/raised.

"given that he understands economics "

This is a joke, right? Pay attention. Prof. Anderson is not an economist. He is a copy and paste artist, lifting comments from 'economists' he shares poltical views with and who support an ideology he can't even explain. Is there anything more hyporcritical than a libertarian economist that works at a state school? (Maybe a libertarian real estate agent)

Prof. Anderson is a spokesperson. What's unfortunante for him is his track record of inconsistancies and ignorance is building on this blog. When he says 'No doubt, when inflation begins to really catch fire -- and there is no avoiding it now' and eventually deflation takes over, he'll come up with some excuse or revisionist story explaining what he really meant, similarly to the nonsense he pulled when he called Krugman a thief or his dance around commenting on interest rates.

I just hope his students understand this, and have realized there is more to economics than theories like Says Law and crowding out, which have exactly zero emperical support.

Im pretty sure the biggest recession since the greatest depresson, which began in 2008, was preceded by large budget deficits under bush, if surpluses "cause" recessions and depressions, why did such a large scale recession happen when bush was running large deficits during the 2000's? Where they not big enough?

If you are attributing Clinton's paper surplus, which was just that, on paper, to the recession in 2001, you can't use the same alleged "surplus", for the cause of the 2008 recession,7 years later.

Im pretty sure the biggest recession since the greatest depresson, which began in 2008, was preceded by large budget deficits under bush, if surpluses "cause" recessions and depressions, why did such a large scale recession happen when bush was running large deficits during the 2000's? Where they not big enough?

If you are attributing Clinton's paper surplus, which was just that, on paper, to the recession in 2001, you can't use the same alleged "surplus", for the cause of the 2008 recession,7 years later.

According to the data: http://www.data360.org/dataset.aspx?Data_Set_Id=62Surpluses under Clinton existed for four years, 1998 through 2001, totally about $560 billion. Then we have had deficits ever since, totaling $1.675 trillion through 2007. Surely the "beneficial" effects of the huge deficits from 2002 to 2007 should have been enough to overcome the "negative" effects of the relatively tiny surpluses under Clinton. But no, the severe recession that began in about 2008 was caused by surpluses that were reversed six years earlier. Are you seriously trying to make that case?

Then, in 2008, 2009, and 2010 we have had deficits totally $3.165 trillion. That must mean that the economy in 2011 is really booming now, right? Oh no, it is STILL suffering from those relatively tiny surpluses from ten years ago.

Let's face it, APL, the chartalist case you keep making is completely moronic, and hopeless.

If, at this point, you're still of the belief that deflation is still right around the corner, you really are beyond hope.

Or maybe you're projecting a world in about 10-15 years after full implementation of the 'Krugman Utopian Project' of unfettered spending that eventually and officially dismantles the US economy and turns us into a 3rd world shithole?

AP’s guru, Abba Lerner (1903-1982) proposed a ghastly draconian price control system as late as 1980:

“Initially he toyed with various administrative wage and price control policies, but he found those lacking and soon gave them up. He replaced them, first, with a tax based incomes policy and ultimately, a market based[!!!] incomes policy in which property rights in prices are set and individuals have to buy the right to change prices from others who change their price in the opposite direction. “ [@ page 12]

There is a basic dishonesty in the presentation of the MMT "program" by its advocates. They don't mention that it is an attempt to rescue socialism from its pure implementation by Stalin. The Table of Contents to Lerner’s book “The Economics of Control” expresses his goal as an attempt to save SOCIALISM:

http://tinyurl.com/3h2qy7q

And why doesn't AP EVER address our repeated concerns if his program is so solid?

"Lerner was bubbling over in novel policy proposals. For instance, his analysis of inflation led to an early advocacy of incomes policies (1947) and, later, his remarkable "Market Anti-Inflation Plan" (MAP, 1980). Heuristically, MAP proposes to "internalize" the costs of inflation by setting up a type of voucher system whereby a firm obtains a surplus voucher to increase sales if sales in that year fall before a particular aggregate target, while a firm whose sales growth exceeds the target will incur a deficit voucher. The rattlesnake juice comes with the market part of it: if a firm wishes to raise sales above target regardless, then it can buy surplus vouchers on the open market from firms who are selling below target. This extension of the marketplace to the very process of inflation, Lerner argued, would not only internalize the externalities of inflation but also be an effective way of controlling aggregate demand without losing the individual dynamism of entrepreneurial activity."

MMT sees humans as rats in a maze and wants to control them while leaving them partially free to create stuff to be seized and redistributed. No wonder they hide their basic motives (and deny the law of scarcity).

Here is a solid takedown of MMT, one that even the “great” Warren Mosler couldn’t even conjure up a legitimate rebuttal to. Love to see AP go there and have fun on the comment section.

Just for kicks, AP’s hero Warren Mosler gave a brief speech at our school once for the Senate campaign last spring, where he was mumbling under his breath the whole time about this nonsense called MMT, saying stuff that made no sense what so ever, that not only was everyone in the audience sneering at him, even the econ department profs had a laugh, as well as Schiff, who spoke directly after him. The guy is just plain weird, not only with his economic claptrap of a theory, but even in person.

That Jack Sparrow article was interesting. I especially liked the elephants in five dimensions. All economic phenomena can be explained with “normal” rules based upon logic and experience. There is no need for a bizarro fifth dimension. Surpluses precede busts because everyone is working, asset prices and tax collections are high and the perceived need for government spending and debt is low. The bust ensues because of prior malinvestment induced by the funny money, not because of the surplus.

AP do you invest your personal money according to your economic philosophy? That is, do you put your money where your mouth is? If you do, then I will at least respect you for that. I will however also hope you don’t get completely devastated financially. I do not wish that horror that on any one.

If you don’t invest accordingly to the philosophy you espouse, well then you are one of just 6+ billion on this planet with an opinion and no courage to back it up. Beck is leaving the 5 O’clock slot on Fox maybe you should apply so you can be like all the other talking heads.

Well said, indyguy77, and let me also offer kudos on your willingness to wade through the garbage Krugman spews on a daily basis and provide us a takedown of his comedy of errors. It's getting to where I can't stomach reading his filth, and it wasn't that long ago I considered myself a fairly regular reader of his blog and op-ed columns. Maybe it's just me, but he seems to have ratcheted up the partisan shrillness of late and has now fully morphed from economist to political activist (read: hack).

Not sure I disagree Dr. Anderson but what "malinvested" resources are you talking about? And isn't cutting taxes the same thing as throwing public resources at the problem? Throwing money as you put it? And why is subsidizing ethanol worse then subsidizing oil, or defense industries, or housing, or........on and on? I absolutely do not get your point. I suppose I'm just part of the "political class' and won't get it.

Bateaux: When you say "And why is subsidizing ethanol worse then subsidizing oil, or defense industries, or housing, or........on and on?" you seem to be thinking that Prof. Anderson is in favor of subsidizing oil, etc. I am sure he isn't. Every time the government tries to direct capital away from what people, on their own, reflected in the market, want it to go, and instead send it to businesses that have bribed (excuse me...."lobbied" and "supported the reelection campaigns of") politicians, that capital will end up malinvested.

For example, for decades the government has had policies that favor directing capital toward homebuilding. Those policies include, amongst dozens of things, tax deductions for mortgage interest payments (but not rent), the subsidies in the form of implied guaranties for Fannie Mae and Freddie Mac, exemption of private homes from capital gains taxes, and so forth. People respond to incentives, so they responded with a many decades long building boom, not only in terms of the quantity of housing units constructed, but the massiveness of the McMansions that were built.

All that capital that went into private houses was capital NOT available to go into building more efficient factories, or R&D, or education, or many other things that would be benefiting us now, had we invested in them instead of fancy houses, in which live many unemployed people who can no longer pay the mortgage.

That is malinvestment for you. Keep the government as much as possible from having policies that direct capital (or economic activity generally) in any particular direction, and you won't have this kind of problem.

Not that people won't make investing mistakes--they always will, but those who are bad investors will lose their money and not be in the position to invest badly quite as much going forward. This way the market puts more money and responsibility into the hands of good investors, and takes it away from those who make bad decisions, making us on a weighted average basis smarter investors going forward.

Has a politician ever been punished for promoting policies that caused economic calamity? Not that I can think of. And when politicians use taxpayer money to rescue incompetent bankers and keep them in power, it thwarts the normal characteristic of the market to remove idiots from allocating capital.

"To make matters worse, the Obama administration continues to insist that granting huge subsidies to corn-based ethanol and electric "wind farms" ("subsidy farms" is the more appropriate term) will help lead us out of the recession. Earth to Obama (and Krugman and the others): it is impossible to subsidize oneself into prosperity. Any benefits accrued to one party MUST be confiscated from another when subsidies are involved. An economy built upon subsidies is an economy that will continue to shrink."

Ok, I’m curious about what economics class you actually teach. Because, any course higher than the intro to macroeconomics presents various growth models. For instance, the Romer Growth Model. Have you forgotten that ideas and innovation grow an economy at a faster rate than simply a brute labor force?

Also, considering that roughly 70% of GDP is personal consumption and America is primarily a service industry that does not manufacture much beyond big ticket items, where is our comparative advantage? Well, many agree that much of America’s future global competition is going rest in fields such as renewable energy technologies (not to mention biomedical, information technologies, internet technologies, etc).

Subsidies towards renewable energy sources are designed to spur the innovation to create. The subsidies certainly aren’t in place to support the industry. It’s fallacious and disingenuous to compare the subsidies of, let’s say, the agricultural industry to the “wind farm” industry.

Remember, ideas grow a fast faster. Perhaps you should stop demonizing them. I doubt your credentials as a serious economist.

I love when random statists come on here spewing nonsense without any basic understand of basic Austrian Concepts.

Government spending does not create economic growth because it has to divert real resources and capital away from productive ends that could have been used to satisfy real consumer preferences, but instead, is being channeled into ends that may or may not make economic sense.

And of course, because government can’t engage in economic calculation like private entrepreneurs can, and because it is not subject to market forces like profit and loss, there is no way for the government to determine if its “green technology” spending (not investment, because government can’t invest: see economic calculation) is the best and most productive use of the funds.

Government spending consumers capital, and if capital accumulation is how you raise real standards of living and wages, government spending makes people worse off no matter your intentions are, or whether or not you think you are smart enough to spend other people’s money wiser than they can themselves.

You don’t know whether green technology is the future, you can’t possible know that. However if you want to be an entrepreneur and figure all that out, sure go ahead.

As Hayek explained with the pretense of knowledge and the use of knowledge in society, government planners responsible for allocating resources toward their preferred ends have no ability to determine whether or not it makes sense economically

If green technology is so efficient, productive and makes sense economically, then it would stand on its own two feet and the fact it needs public money is a tacit admission that it would not be development absent the subsidy.

Also, why are spain and germany pulling back from their “green technology” revolutions? Or “investments” if it worked so well, why have both countries stopped their “investment

Government should not pick winners and loosers in the market places, the future should be determined by profit seeking entrepenuers who have the proper incentives to make the best use of the capital.

I am unfamiliar with Austrian concepts? On the contrary, I am quite familiar and obviously to a greater degree than the people spewing anecdotal evidence to support ideology. I use statistics and models to support and predict real world occurrences. That is the job of an economist and I seem to be the only one here.

Simply regurgitating Fox news rhetoric isn't an argument and it certainly doesn't make you proficient in understanding the Austrian school of thought. In fact, it's a testament to your stupidity.

The fact is, in some cases, yes the government has a crowding out effect in SOME markets. It's not a secret. But that does not mean every grant or subsidy that the government makes is bad.

Take for example the Small Business Jobs Act of 2010.

http://www.sba.gov/content/small-business-jobs-act-2010

Can you honestly sit there and say the provisions in this legislation are fundamentally wrong? 2010 was a year marked by staggering unemployment and a lack of consumer demand. Is it wrong or evil for the government to subsidize small business in order to correct market inefficiencies? Have you considered the fact that small businesses account for the vast majority of our domestic jobs?

I don’t see any economists here. I see people blinded by red and blue with a failure to grasp even the most basic economic concepts. It takes more than catch phrases to subscribe, much less understand, the Austrian school of thought.

@Progressive Cynic: "I am unfamiliar with Austrian concepts? On the contrary, I am quite familiar and obviously to a greater degree than the people spewing anecdotal evidence to support ideology."

Really? I look forward to your cogent rebuttals. This will be a nice change from the usual Keynesian retards we get around here.

"I use statistics and models to support and predict real world occurrences. That is the job of an economist and I seem to be the only one here."

Ah. So you predicted the crash in 2008 and the housing market bubble? Let's take a look at your blog.

Hmmm... Seems you were primarily concerned with bottle collecting and building computers then. Rarely any political content, and most of it consisted primarily of mudslinging against McCain and Palin. Nothing in particular wrong with that, but very little economic content. Let's keep reading.

"But I don't see how this redistribution of wealth is moving us toward socialism. It's not doing anything to destroy the class structure or an attempt for government to control the means of production and distribution. It's just more pandering to lobbyists and other special interest groups. What's more capitalist than that?"

Sorry, but this is corporatism, not capitalism. This doesn't bode well for future reading.

Can you honestly sit there and say the provisions in this legislation are fundamentally wrong?

Hell yes.

2010 was a year marked by staggering unemployment and a lack of consumer demand. Is it wrong or evil for the government to subsidize small business in order to correct market inefficiencies?

The staggering unemployment and "lack of consumer demand" was caused by government distortions of the pricing, investment and capital structure. Subsidizing anyone is not going to correct alleged market inefficiencies which are not the problem. So, yes, these subsidies are evil.

Have you considered the fact that small businesses account for the vast majority of our domestic jobs?

Yes, we've considered that. Which is why we opposed bailouts to giant corporations and banks and oppose the central bank in general.

Query: What the heck does "Fox News rhetoric" have to do with Austrian Economics? O'Reilly, Hannity and Limbaugh know nothing of Austrian Economics and would be loathe to mention it because it might preclude their relentless warmongering.

What does "Fox News rhetoric" have to do with Prof. Anderson's strong antiwar credentials?

“Query: What the heck does "Fox News rhetoric" have to do with Austrian Economics? O'Reilly, Hannity and Limbaugh know nothing of Austrian Economics and would be loathe to mention it because it might preclude their relentless warmongering.”

That’s exactly what I’ve been trying to figure out. Try to keep up Bob.

“What does "Fox News rhetoric" have to do with Prof. Anderson's strong antiwar credentials?”

Absolutely nothing. Again, try to keep up Bob.

“The staggering unemployment and "lack of consumer demand" was caused by government distortions of the pricing, investment and capital structure.”

This statement is completely incoherent and it shows an utter misunderstanding of our economy and the causes of the recession. I’m not going to bother formulating a rebuttal, beyond pointing out how ridiculous this statement is.

“Sorry, but this is corporatism, not capitalism. This doesn't bode well for future reading.”

Wow. Nice misquote. Generally, it helps to read things in context. This is the beginning of the quote:

“The other five-sixths of the redistributions go to well organized groups like businesses, labor union interests, the elderly, and various subsidies. Moreover, the people receiving these redistributions often have incomes well above the average person (Gwartney 2008).”

Evidently, you totally missed the concept of transfer payments in whatever economic education you claim to have. And you say I don’t know what capitalism is? This is literally textbook market analysis. I even subtly implied “means testing” to lower the costs of these payments. Try reading things in context instead of mining for quotes to cherry pick… The purpose of that entire misquoted concept I was trying to convey were distinctions between capitalism and socialism. Simply trying to rehash my words by quoting them out of context, in an attempt to paint me as inept, is a waste of both of our time.

“Really? I look forward to your cogent rebuttals. This will be a nice change from the usual Keynesian retards we get around here.”

Sigh. It is difficult to frame rebuttals when you sum up macroeconomic phenomena by referring to vague generalities of complex ideas. At best, this reflects that you clearly don’t understand economics. At worst, it shows your statements are disingenuous.

So how about this, I too will pose vague notions of logic. Between FDR’s New Deal and Milton Friedman’s revival of Classical economics (and subsequently the Austrian school) the Keynesian school was dominant. During this era were decades of economic expansion. The middle class was created and flourished. America actually manufactured goods and had export surpluses. There were no huge banking disasters. The federal budgets were far more balanced and the national debt was manageable.

Then Reagan came along armed with an entourage of monetarists and the neo-Austrians. Everything changed after that. Since then, we’ve had 2 major banking disasters (S&L and 2008). Both caused by banking deregulation. Federal debt has skyrocketed because Republicans sell this idea of the Laffer Curve and how tax revenue will increase by cutting taxes on the wealthy. Wages have grown much more stagnant once the deunionization began in the 1980s (led by Goldwater himself). Really the list goes on and on, and I don’t want to keep boring you with history.

Now, if you want to truly have an intellectual debate, we can start comparing Austrian economic models to Keynesian models. But I honestly do not think you’re actually versed in the various models. I think you just subscribe to the ideology that government is “bad” and like promote yourself as some sort of academic from the Austrian school of thought.

“Ah. So you predicted the crash in 2008 and the housing market bubble? Let's take a look at your blog.”

Sorry, I was just an undergrad then. These days, I am working on advanced degrees… Nice straw man fallacy though. Keep trying... I came here hoping for a good debate. But all I am finding are logical fallacies and a clear misunderstanding of basic economic principles.

When it’s all said and done, I’m not saying any particular economic models are inherently infallible. And I’m certainly not advocating that one political party has it completely right. What I am saying, is that economics is a field that should be driven by pragmatism and not ideology. Hell, even grandpa Friedman worked to improve Keynesian models without completely abandoning what’s been tried and true.

What the hell is a "neo-Austrian"? Reagan had no "neo-Austrians". He had no "crypto-Austrians". He had no Austrians at all. He had inflationists. He didn't slash spending. He increased military spending and increased all spending.

Jonathan Finegold Catalan explains the evils of government spending from an Austrian perspective (of which TPC knows nothing).

http://mises.org/daily/5123/Government-Spending-Is-Bad-Economics

In October, 1974, I had graduated from college 7 months earlier and had been an Austrian for 21 months. So, even at that early date, I had plenty of experience with no-nothing cement-headed "progressives". It's getting real old.

There is no such thing as Keynesian economics. Keynesian economics is what witch craft is to medicine, complete hogwash. The “theory” is scam, and that is what it is a scam, and designed precisely to be one, by Keynes who wanted to trick British laborers into accepting lower wages through inflation because cutting them outright was politically impossible.

The whole thing was a fraud from the beginning, and designed to steal purchasing power from citizens through inflation. He created some ad hoc, ad lib, nonsensical theory jinned up with mathematical jargon to trick the masses into being controlled by a bunch of statists who, apparently according to the statists, need to dupe the masses into spending when they become too stupid to spend and demand and enough stuff, and save too much, and create recessions(of course, according to the anti-theory that is Keynesian economics)

Recessions happen because the capital structure of the economy is distorted due to excessive amounts of money dilution from the central bank. This creates malinvestment, and when the credit necessary to finance these malinvestments dries up, there is unemployment thus a recession.

The boom and bust are caused by the fed and its monetary dilution, and not because people are to stupid to realize they need to “demand more stuff”

The middle class was created by the evolution of capitalism as real wages and incomes rose due to increased productivity, efficiency, and capital accumulation after we drastically cut government spending after the war which freed up resources for the private sector.

The middle class was created by the free market, and not legislated into existence by a bunch of statists.

Debts are high now because of spending, not because we’re not soaking the rich enough. They already more than their fair share of taxes. We will not tax our way into prosperity. Sorry statist. http://www.taxfoundation.org/files/ff104.pdf

Heres Hayek on the man which you derive your alleged economic principles from

http://hayekcenter.org/?p=2701

no, we dont need more statism,we need more freedom. and no, dont give me the typical statist line, we diddnt "try that under reagan and bush", we tried the opposite actually

I'm going to pronounce TPC a major league troll way beyond the likes of AP Lerner or Lord Keynes. While those two love to engage in evasion and dissembling, I usually learn something while trying to refute them and their arguments take some thought to refute.

It's a true waste of valuable time arguing with someone claiming that Alan Greenspan was an Austrian after the time he entered the Ford administration in the 1970s or that what AG or Reagan did in government is some form of refutation of Austrian ideas.

Progressive troll, if you want to convince people here you are actually familiar with austrian concepts, labeling alan greenspan one because alan greenspan said so is probably bottom of the list of ways to do that. Your knowledge of austrian concepts seems to end at knowing how to spell it correctly. Noone has to "cherry pick" quotes to make you look inept. Your just spewing the same old "government knows best how to spend other people's money" bullshit we've heard over and over and over. Its amusing how much hubris is contained in your excrutiatingly dull corrospondences. I would suggest watching this video:

Also, please explain how a free market, whose main concern is the efficiency at which it can determine and meet the demands of individuals willing to engage in voluntary exchanges,is not distorted when government spending must divert those resources from individual voluntary transactions to collectively chosen avenues of wealth redistribution? I await your condescending robotic dismissal.

So, did anyone else notice how in TPC's little historical narrative about the glories of Keynesianism, the 1970s apparently never happened? I suppose it shouldn't be surprising that someone who doesn't know the difference between an Austrian and a monetarist also thinks that the period between 1933 and 1981 was one of uninterrupted economic growth.

The truth is, Greenspan did share overlapping ideology with the Austrians. It was evident and even so by his own admission. With that said, it is possible to hold competing thoughts in one’s head. Evidently, not for you Bob, but it is possible. That’s why Greenspan was a former world leader, and you’re just Bob from some random blog. So you can come back with another analysis from another biased source as long as it suits your stance.

Now, back to my bigger point, which you have seemed to skirt Bob. Reaganomics and the Austrian school are close relatives in theory, perhaps not in practice (important point here Bob, try to keep up). By Reagan’s own admission, Hayek was one of the most inspiration people in his life.

“I suppose it shouldn't be surprising that someone who doesn't know the difference between an Austrian and a monetarist also thinks that the period between 1933 and 1981 was one of uninterrupted economic growth.”

I never said it was uninterrupted. I said something along the lines of continuous expansion. Sure, the oil crisis in the 1970s set things back a bit. But, keep in mind, it wasn’t a crisis that resulted from public or monetary policy (aside from some minor attempts at price controls).

“"So, did anyone else notice how in TPC's little historical narrative about the glories of Keynesianism, the 1970s apparently never happened?"”

I’m quite familiar with the 1970s oil crisis and the failures of monetary policy. In fact, this area set the stage for the rebirth of the old failed ideas from the classical and Austrian schools. It gave birth to Supply Side economics, a mixture of the two schools. And while there are still purists out there, you can’t deny the overlap. No matter how hard you try.

One school A believes in saving money and never writing bad checks. The other B believes in nothing but writing bad checks and spending till the cows come home. Allegedly merge them together in practice [impossible] and blame the results on A.

What a frickin' moron.

This is a twist on LK's line where he states that we must be responsible for the problems caused by FRB even when we oppose FRB because FRB is "the free market" and therefore our fault.

I again declare Austrian Economics the winner by default. The opposition has yet to show up.

I clearly said that theories are close relatives. However, in practice, politicians don't always adhere to what they preach. This shouldn't be a surprise Bob. Again, I realize that you have trouble entertaining two ideas at once, but try to keep up.

The reason the opposition hasn't showed up yet is because you're waiting around in the Special Olympics arena.

"try to keep up" hahaha. Is that some sort of slogan of his? It's lame, especially after the third...fourth...fifth time.

He apparently believes everything he hears from the government. Is Obama anti-war just because he says he is TPC??

I almost hate to actually address him, but I will...

@TPC - How do you explain austrian economists all over the world correctly diagnosing the housing bubble years ahead of time (not to mention some that were able to see the dot com bubble) while Ben Bernstanke and Paul Krugman had their heads up their asses?

Great ad hom Derrick. I see that Bob isn't the only intellectually deprived person who frequent this blog.

I just have a few points to clarify:

1. At no point did I say that I believe everything the government says. In fact, I specifically said that politicians do not practice what they preach.

2. What does Obama being anti-war or not have anything to do with what we're discussing?

3. How does whether or not some people predicting (and this of course is debatable) a bubble give merit to their economic models? Anybody with slightest concept of the real estate market saw predatory lending to people who had no business having those mortgages.

4. When I tell Bob to keep up, it is because he's slow to process information. You, on the other hand, seem to have ADD. Why am I going to address 20 other things you mention that are completely irrelevant?

5. "Please enlighten me, its obvious you are far more intelligent that I."

Banks have engaged in usury since their creation. I'm not quite sure what point you're trying to convey here.

"Bernanke must be the most predator-iest lender of all time."

Greenspan inflated the bubble with the low Federal Funds Rate and facilitated Wall Street's irresponsibility by an outright refusal to exercise the Feds regulatory powers.

By the time Bernanke took office, the Federal Funds Rate was already pegged at historical lows. This set the stage for the liquidity trap we're currently in and the reason the why the interest rate remains low.

Sigh, another clueless soul. What is the Austrian view on public education? Evidently, it failed a great many people here. We might find some common ground yet.

We've been quite aware of the non-thinking Keynesians and their silly homogenous generic aggregates (SHGA).

The Keynesians also have several other categories of SHGA's. Like the SHGA regulator, the SHGA depositor, SHGA debtor and the SHGA banker. A priori we know that the latter three are going to need the guiding hand of the SHGA regulator who has the guns, muscle and wisdom to forceably guide his victims to make the right decision. And we know that he will make a better decision than his victims before we even know the details of their plans. Just because.

"3. How does whether or not some people predicting (and this of course is debatable) a bubble give merit to their economic models? Anybody with slightest concept of the real estate market saw predatory lending to people who had no business having those mortgages."

Wouldn't you be more likely to consider someone's theory if it actually yielded results??

When was the last time Krugman or Berstanke correctly forcasted anything? Their models are CRAP.

My point of Obama is that you have to look at what ACTUALLY happens, not just what someone says. You use AG as an argument against Austrians by using some quotes when he never did ANYTHING other than full blown Keynesianism while at the FED.

When it fails, let's do the Keynesian thing. Let's blame the market for being evil, let's ignore statistics, let's ignore all evidences againts Keynesianism, let's create a bunch of regulations, print money like mad and continue doing the same things, over and over again. If that still doesn't work, well, human beings are to blame, because they are SO EVIL.

I'm sick of this Keynesian crap. In the last decade, I've given the Keynesian economists dozens of second chances so they could prove themselves right. It failed miserably, but they still blame the market, the human beings are to blame. It's not a theory anymore. It's a damn religion. Keynes is God.

the period between 1933 and 1981 was one of uninterrupted economic growth Well, yes. Far better growth, a far better economy, including the 70s, than we have seen since then. When Keynesian economics, even bastardized, was dominant, the world saw the greatest period of prosperity it has ever seen. Takes a lot of BS to hide that. Also, the inflation of the 70s was overstated then according to several economists (Dean Baker, Randall Wray), which accords with my recollections. The 70s inflation was largely due to real world events that no economic system could have prevented.

About Me

I teach economics at Frostburg State University in Frostburg, Maryland. We are located on the Allegheny Plateau, and we have cool summers and tough winters.
I am the single father of five children, four of them adopted from overseas and I have two grandchildren. My family and I are members of Faith Presbyterian Church (PCA).